Singapore Budget 2017: Is now the right time to buy a resale flat?

Singapore Budget 2017 has been announced, and one of the attention grabbers is the increased grant for resale flats. Couples buying a four-room or smaller resale flat will now get a CPF housing grant of $50,000, while couples buying bigger flats will get a grant of $40,000. Previously, the CPF housing grant was capped at $30,000. Coupled with low market prices, this suggests it may be time to jump on resale flats:

A combination of factors are making resale flats more desirable than ever

Despite the deluge of new BTO flats, the appetite for resale flats is unaffected. This is due to three fundamental reasons: the limited availability of BTO flats in mature estates, the ability to move in immediately, and the fact that some buyers (such as a couple who are Permanent Residents, or Singaporeans marrying non-citizens) cannot buy BTO flats. Resale prices are only falling due to a softening of the property market as a whole.

Also, from the Q3 2016 onward, we saw that resale flat prices have largely stabilised, whereas private property prices continue to decline. Furthermore, the volume of resale transactions increased by almost eight percent, year-on-year, in 2016. Now, with the added housing grant from the Singapore Budget 2017, there is a real chance that this will be the first property segment to see an uptick.

Some key factors to consider are:

• The subsidies make any resale flats an incredible bargain
• Resale flat prices are probably as low as they can go
• The waiting game is mostly over for resale buyers
• The supply of new housing in mature estates remains limited

• The subsidies make any resale flats an incredible bargain

If you add the other possible housing subsidies ($40,000 for Additional CPF Housing Grant, and $20,000 for Proximity Housing Grant), the total grant for a resale flat comes to around $100,000 or $110,000.

Now one of the most central listings we have for resale flats is in Toa Payoh. This is a four-room flat for $688,000, which is not surprising given it’s in the heart of Toa Payoh Central. This is a built up area, which combines retail, dining, and a transport hub right outside the front door.

With the maximum possible grants, this unit would be around $578,000. That puts it at about half the price of many nearby private properties, with the same amenities (and lower maintenance fees, being a HDB property). 

• Resale flat prices are probably as low as they can go

How do you spot when a property price has probably bottomed out? One clear sign is when prices stop falling, but transaction volumes increase. That means more people are buying, even when the sellers refuse to drop the price any lower – what follows next is often an uptrend in price.

As of now, resale flat prices are already down around 10 percent, since the last peak in 2013. Most of them can now be considered cheap. Coupled with the generous increase in grants, buyers are probably looking at the best deal they’ll see in a long time.

• The waiting game is mostly over for resale buyers

Buyers who are still waiting for resale prices to fall further had better rethink their strategy. Due to the factors outlined above, it’s likely that the waiting game is over. Singapore Budget 2017 signalled the end of it. We expect that there will be a big rush for resale units the in the coming months, and anyone still waiting is likely to see the price go up rather than down.

In fact, we wouldn’t be surprised if many couples considering mass market condos change their minds based on the bigger grant, and instead opt for a centrally located resale flat.

• The supply of new housing in mature estates remains limited

We mentioned earlier that resale flat prices are probably unaffected by the supply of BTOs. Well we also know some property watchers adamantly dispute that, and insist that increased supply must also impact resale prices. So let’s say, for the moment, that they are right.

The supply of BTO flats and ECs, throughout the past three to five years, has mostly been confined to less mature estates. We have seen plenty of new developments, but in less central places like the outskirts of Tampines, Woodlands, or around Tanah Merah.

Even if you believe ramped up supplies of BTO flats affect resale prices, it’s clear that few of these new projects can challenge the amenities of a resale flat in a built up area.

The rush for resale flats will be a quick one

For those of you currently looking at resale flats, you’d better move fast; the Singapore Budget 2017 has opened the floodgates for more buyers. For those of you who have been looking at mass market condos, you may want to work in the new subsidies, and see if a resale flat with a central location (or big floor space) is a viable alternative.

You can look up some of the best resale flat prices on 99.co.